The Pound encountered strong support below 1.58 against the U.S Dollar on Thursday and pushed higher with a peak close to 1.5875, as the market continues to consolidate following the recent sharp losses. In this context, the UK currency was also able to recover towards 1.17 versus the Euro, amid some speculation of a reduction in short positions, while month-end positioning caused erratic trading. In terms of economic data, the monthly increase in the Nationwide house price index provided net support for Sterling, although prices were relatively unchanged for the year. The Pound weakened against the Euro this morning, however, in anticipation of the UK manufacturing data released this morning. The PMI data is expected to confirm that growth in the sector slowed in January, increasing the prospect of a triple-dip recession this quarter. Sterling is approaching the lowest level in over 13 months against the Euro this morning, with the PMI index expected to show that factory output fell to 51, from 51.4 in December. A figure closer to the line of growth at 50 would put Pound under significant selling pressure. The Pound did make strong gains versus the Australian Dollar yesterday, as the Aussie came under pressure following reports that growth in Chinese manufacturing fell below initial expectations. In contrast, the New Zealand Dollar remained largely resilient following comments from the Reserve Bank governor Graeme Wheeler, who said that the nation needs to reduce its budget deficit or face higher interest rates.

The Euro traded lower against the U.S Dollar yesterday following a disappointing report on retail sales growth in Germany. Sentiment was boosted by news that unemployment figures for December were stronger-than-expected with a seasonally adjusted decline of 16,000, following a revised drop of 2,000 the previous month. There are fresh concerns surrounding the banking sector following poor earnings data from Deutsche Bank and investors will be watching the developments with the Italian bank Monte dei Paschi, especially with regard the potential impact on the general election. In the U.S, there was an increase in initial jobless claims to 368,000 in the latest week, from 330,000 previously. The focus today will inevitably fall on the U.S employment report with non-farm payrolls expected to be solid without being spectacular. Elsewhere, the region manufacturing PMI for the Chicago region was stronger-than-expected but the Euro continued to test resistance levels close to a fresh 16-month high against the Dollar above 1.36.

Data Released 1st February

EU 08:58 Markit Manufacturing PMI (January)

U.K 09:28 Markit / CIPS Manufacturing PMI (January)

EU 10:00 Flash HICP (January)

EU 10:00 Unemployment (December)

U.S 13:30 Non-Farm Payrolls (January)

- Unemployment / Average Earnings

U.S 13:58 Markit Manufacturing PMI (January)

U.S 14:55 Final Michigan Sentiment (January)

U.S 15:00 Manufacturing ISM (January)

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